U.S. Stocks Pull Back Sharply As Bond Yields, Dollar Rebound

Stocks have shown a substantial move back to the downside in morning trading on Thursday, pulling back sharply following the rally seen in the previous session. With the steep drop on the day, the S&P 500 has once again fallen to its lowest intraday level since late 2020.

Currently, the major averages are just off their lows of the session. The Dow is down 580.38 points or 2.0 percent at 29,103.36, the Nasdaq is down 367.72 points or 3.3 percent at 10,683.92 and the S&P 500 is down 94.14 points or 2.5 percent at 3,624.90.

The sell-off on Wall Street comes as traders cash in on yesterday’s gains, as the buying interest generated by the Bank of England’s bond market intervention has quickly evaporated.

The moves by the BoE contributed to a pullback by bond yields and the U.S. dollar, inspiring traders to pick up stocks at reduced levels following recently weakness.

However, bond yields and the dollar have reversed course this morning, with the yield on the benchmark ten-year note partly offsetting yesterday’s 25.9 basis point plunge and the U.S. dollar index rising by 0.2 percent.

A report from the Labor Department showing first-time claims for U.S. unemployment benefits unexpectedly fell to a five-month low last week is also weighing on the markets.

While the report points to continued strength in the labor market, traders may view the data as giving the Federal Reserve confidence that it can continue to aggressively raise interest rates.

The report showed initial jobless claims slipped to 193,000 in the week ended September 24th, a decrease of 16,000 from the previous week’s revised level of 209,000.

The dip surprised economists, who had expected jobless claims to inch up to 215,000 from the 213,000 originally reported for the previous week.

With the unexpected decline, jobless claims dropped to their lowest level since hitting 181,000 in the week ended April 23rd.

“While overall economic activity is expected to slow in response to sharply higher interest rates and a weakening global backdrop, the low level of claims is a reminder that labor market conditions remain extremely tight even as we head toward a mild recession next year,” said Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics.

“The imbalance between the supply and demand for workers, which is putting upward pressure on wages, is a key factor behind the Fed’s plans to continue aggressively raising interest rates,” she added. “We expect the Fed to raise rates another 125bps this year.”

A separate report from the Commerce Department showed the annual rate of growth in core consumer prices in the second quarter was upwardly revised to 5.0 percent from 4.8 percent.

“To the extent that there are any clear implications for the Fed, that will further support officials’ current hawkish stance,” said Andrew Hunter, Senior U.S. Economist at Capital Economics.

The surge in core consumer prices, which exclude food and energy prices, was still slightly slower than the 5.3 percent spike in the first quarter.

Adding to the negative sentiment on Wall Street, data from Freddie Mac showed the 30-year fixed-rate mortgage averaged 6.70 percent in the week ending September 29th, up from 6.29 percent the week before,

Airline stocks have moved sharply lower in morning trading, resulting in a 4.3 percent nosedive by the NYSE Arca Airline Index. The index has plummeted to its two-year intraday low.

Substantial weakness is also visible among semiconductor stocks, dragging the Philadelphia Semiconductor Index down by 3.9 percent to its lowest intraday level in almost two years.

Computer hardware stocks are also seeing considerable weakness on the day, as reflected by the 3.8 percent plunge by the NYSE Arca Computer Hardware Index.

Natural gas, commercial real estate, oil service and housing stocks have also shown notable moves to the downside amid broad based weakness on Wall Street.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan’s Nikkei 225 Index jumped by 1.0 percent, while Hong Kong’s Hang Seng Index fell by 0.5 percent.

Meanwhile, the major European markets have shown notable moves back to the downside. While the French CAC 40 Index has tumbled by 2.2 percent, the U.K.’s FTSE 100 Index and the German DAX Index are both down by 2.5 percent.

In the bond market, treasuries are giving back ground following the substantial rebound seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 8.1 basis points at 3.786 percent.

Source: Read Full Article